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Private Sector Share of Post-Sanction Foreign Deals Meager

Private Sector Share of Post-Sanction Foreign Deals Meager

When world powers agreed in 2015 to lift sanctions on Iran in return for curbs on its nuclear program, the deal’s supporters in the United States, Europe and Tehran hoped renewed trade and investment could boost Iran’s private sector and weaken the state’s hold on the economy.
But a Reuters review of business accords reached since then shows that the Iranian winners so far are mostly companies owned or controlled by the state.
Of the nearly 110 agreements worth at least $80 billion that have been struck since the deal was reached in July 2015, 90 have been with companies owned or controlled by Iranian state entities.
The Reuters analysis drew on interviews with company officials, statements by Iranian, European and Asian companies, Iranian news reports, ownership data from Tehran Stock Exchange, filings with Iran’s official company registry and statements by the US Treasury.
Many deals are preliminary agreements with no published financial value. The deals span energy, infrastructure, pharmaceuticals and other key sectors. South Korean, Italian, French, German and Russian companies have signed the most.
The review found that beneficiaries of the nuclear pact include the Headquarters for Executing the Order of the Imam, also called EIKO, an organization with stakes in nearly every sector of Iran’s economy.
EIKO said in a statement to Reuters that Iran’s private sector “is reluctant to make large and long-term investments”. EIKO and groups like it “create a favorable atmosphere for investment, private-sector development and the downsizing of the government,” it said.
The state dominates Iran’s economy, so state-controlled firms were always likely to win most business after sanctions were lifted. Iranian officials estimate that the private sector makes up only 20% of Iran’s economy.
Only 17 deals have gone to private companies, by Reuters’ tally. These include a hotel management pact between France’s AccorHotels and Tourism Financial Group, a large conglomerate.
Of the 90 deals signed between foreign firms and Iranian state-controlled or state-owned entities, 81 were with companies controlled by the government. These include entities such as the National Iranian Oil Company, large semi-public conglomerates whose top executives are chosen by ministers and companies owned by government pension funds.
Astan-e Qods Razavi, whose economic arm lists 36 subsidiary companies and institutes on its website, is a major winner.
Razavi Oil and Gas Development Company agreed in April to discuss developing a gas field with Saipem, an Italian oil and gas company. A Saipem spokeswoman said it was a preliminary agreement.
Reuters also identified three deals between foreign companies and EIKO units, including the proposed construction of a $10 billion oil refinery.
Two other deals were with Barakat Pharmed, an EIKO-owned pharmaceutical company.
EIKO said it is independent and its income goes toward “economic empowerment, building houses for the underprivileged, building schools and cultural centers” and other activities to help the disadvantaged in Iran.